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and 1905 before this monopoly power had been attacked in the Federal courts. Only about a sixth of the crude oil came in 1905 from wells owned by the Standard Oil Company, but this company had an almost complete monopoly of the pipe lines. In the Appalachian, the Lima-Indiana, the Illinois and the Mid-Continent fields, rich in oil for illuminants, the Standard Company handled from 84 per cent. to 96 per cent. of the pipe line business. Railway rates are higher than pipe line rates, so that control of the pipe lines gave control of the crude oil supply to refineries. In 1904 the Standard Company refined almost 87 per cent. of the illuminating oil of the United States and handled the same high percentage of oil exported.

The Standard's system of highly efficient distribution gives it great marketing advantages. Not only has it pipe lines and tank cars and local storage plants, but its tank wagons do away with even the jobber and deal directly with the retailer and the final consumer. About 5,000 of the tank wagons carried the oil to the country stores. Nearly ninetenths of the illuminating oil marketed in the United States was sold in 1904 and 1905 by the Standard Oil Company.

While such questionable practices as cited above from the court bill enabled the oil combination, particularly in its earlier days, to secure and to maintain its monopoly position, the high efficiency of organization, both on the manufacturing and the marketing sides of the business, the perfected utilization of by-products, the general cost-cheapening advantages that come to large scale production, and the courageous and masterful handling of the great problems of foreign trade in petroleum and its products are leading factors which account for the power of this combination.

The Bureau of Corporations thus summarized its findings as to prices* and profits of the Standard Oil Company: "(1) There has been a very marked increase in the margin * For detailed treatement of oil prices see pp. 149 to 157.

between the price of crude oil and the prices of its leading finished products in the United States during the past ten years. This increase in margin is only in small part attributable to increase in costs of conducting the business. Although since the time when the Standard Oil Company first secured a large proportion of the business, about 1874, there has been a material decrease in the margin between the price of crude oil and the price of illuminating oil, the Standard Oil Company can claim no credit for this decrease. The margin of the domestic trade is greater to-day than it would be under free competition.

"(2) The Standard has sold illuminating oil and other petroleum products in the foreign trade much cheaper than in the domestic trade, the difference having been inordinately great since 1902. The American consumer has been taxed in order to maintain the supremacy of the company in foreign trade.

"(3) The Standard discriminates greatly in fixing prices in different sections and in different towns, charging extortionate prices where there is no competition and cutting prices sharply where competition is active. In some cases net prices in one locality in a single state, after deducting freight, have been almost double the net prices in another locality in that state.

"(4) The profits of the Standard Oil Company, particularly on its domestic business, are altogether excessive, and they have been higher during recent years than formerly.

"(5) The real source of the Standard's power is not found in the rendering of superior service to the public, but in the long-continued use of unfair methods of competition. It has, indeed, superior industrial efficiency, but it does not share with the public the benefits thereof.

"(6) The Standard, by reason of its influence as a large shipper, as well as by its general financial power, is able to

secure excessive prices for lubricating oils from most of the railroads of the country, and maintains a practical monopoly in the sale of such lubricants."*

2. AMERICAN SUGAR REFINING COMPANY† COMPETITION in the refining of sugar in the United States was very severe from 1884 to 1887. The margin between the prices of refined and of raw sugar was only .923 cent in 1884, .712 in 1885, .781 in 1886, and .768 in 1887. Eighteen out of forty refineries failed. In 1887 seventeen refineries were united into a trust known as the Sugar Refineries Company. A number of the refineries which entered the trust were closed. The margin was raised to 1.258 in 1888 and 1.207 in 1889. Testimony before the Industrial Commission indicates that a margin of about .60 would cover the cost of refining, including the loss in weight. Experienced sugar manufacturers estimated that the trust by economies, especially those of continuously operated plants, could refine sugar at from three to five cents a hundred pounds more cheaply than could independent refineries. Margins of .70 to .80 would be profitable for refiners. So the margins of 1888 and 1889 were hugely profitable and the result was that the great Spreckles refinery entered the business in 1889, followed by the Mollenhauer refinery in 1890. Price-cutting followed reducing the margins to .72 in 1890 and .828 in 1891. In the latter part of 1891 this competition was ended by the trust buying up the Spreckles refinery. The margin was raised to 1.10, which, as Mr. Havemeyer testified, "is the usual margin we had laid out as necessary for the benefit of the stockholders and proper conduct of the business.

*Report on the Petroleum Industry, Part II, pp. 1 and 2 (1907.)

This story of the American Sugar Refining Company has been compiled from Volume I of the Industrial Commission Report, from Moody's and Poor's Manual of Industrials and from Willett and Gray's Trade Journal. See pp. 125 to 141, of this volume for detailed treatment of price making by the Sugar Trust.

The New York State Courts attacked the trust in 1890 with the result that a New Jersey corporation, the American Sugar Refining Company, with a capital of $50,000,000, was organized in 1891 to take over the trust plants. At the time of organization the corporation controlled about 75 per cent. of the cane sugar refining in the United States. Shortly after its organization the Spreckles refinery was purchased and the combination then controlled about 90 per cent. of the cane sugar refining.

There was no further serious competition in price-making until the establishment of the Arbuckle and Doscher refineries in 1898. Between 1892 and 1898 the margin had run between 1.153 in 1893 as high, and .882 in 1895 as low. The two new refineries entered into a bitterly fought competition with the trust, meeting its price cuts and even cutting under its prices. The margins ran as low as .32, far below the cost of refining. The Arbuckle firm took the position that if the trust, supplying nearly 90 per cent. of the sugar to the United States market, could stand the losses on their huge output, the smaller new companies should be able to stand their smaller losses. The war was continued with more or less violence until 1901, since when a truce has obtained.

After the Arbuckle war was ended the margin between refined and raw sugar prices was moved up to about 1.00 until 1905, since when it has declined. Since 1905 the following are the margins: 1906-.829; 1907-.983; 1908-.884; 1909.758; 1910-.784; 1911-.892; 1912—.879; 1913-.772; 1914 -.869; 1915-.917. It is notable that aside from the war year 1915, the margin has been appreciably below .90 ever since 1905, the average for the nine years 1906 to 1913 inclusive being about .84. The two periods of prolonged costly price-cutting due to the Spreckles and the Arbuckle-Doscher conflicts, seem to have taught this combination the wisdom of producing at a moderate margin, low enough to offer scant

inducement to new fighting rivals and yet high enough to afford goodly profits.

The dividends paid since the organization of the American Sugar Refining Company evidence the profitableness of the average business. Since the year of organization the 7 per cent. dividend has been regularly paid on the preferred stock. The common stock dividends have been: 1891, 8 per cent.; 1892, 9 per cent.; 1893, 22 per cent.; 1894 to 1899 inclusive, 12 per cent; 1900, 6 per cent., and 1901 to 1916 inclusive, 7 per cent. Earnings on common stock have, however, varied greatly, as will appear in the figures since 1908. Common stock earnings are recorded: 1909, 14.2 per cent.; 1910, 5.38 per cent.; 1911, 18.92 per cent.; 1912, 5.34 per cent.; 1913, nil; 1914, 4.82 per cent., and 1915, 4.99 per cent. During the lean years the dividends on common stock have been kept up by drawing steadily upon the surplus, which had been reduced by December 31, 1915, to $16,328,802.

The capitalization of the company since 1901 has been $90,000,000, $45,000,000 of 7 per cent. cumulative preferred stock and $45,000,000 of common stock. The corporation has no outstanding bonds.

In 1915, of twenty-one cane sugar refineries in the United States, the trust owned seven with six of these in active operation. Of sixty-four beet sugar factories in the United States with a daily slicing capacity of 65,000 tons of beets, the trust has interest in twenty-three factories with a daily slicing capacity of 29,000 tons. In 1914 it sold out its entire holdings in the Utah, the Idaho, the Amalgamated and the Lewiston Sugar companies. During the earlier years of this combination's history, it refined from 80 to 90 per cent. of the sugar refined in the United States, but since the advent of the beet sugar companies, and particularly since the more rigid prosecutions under the anti-trust laws, the proportion has lessened until it was estimated to be not appreciably

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